Question: Mr. Secretary, this document says, and the president himself said when he was here, that the military will get smaller. The question is: How much smaller? How much more do you propose to cut the Army and the Marine Corps, over what period? And also, this document says that the U.S. military presence in Europe will, quote, “evolve.” Is that another way of saying that it’ll get cut?

Defense Secretary Leon Panetta: Well, I — as we’ve said in the policy statement — and the president referred to it and I referred to it and Marty referred to it as well — we are going to have a smaller and leaner force. What those numbers are will be part of the budget that will be presented by the president. And at that time, obviously, we’ll reveal what those final decisions are as to the exact size.

But there’s no question that, look, under any circumstances, we were looking at a drawdown as a result of the end of the war and, hopefully, what — the end of the transition in Afghanistan. But budget constraints require that, in addition to that, we are — we have to develop a smaller and leaner force, but one that has to be more agile, flexible, innovative and creative.

With regards to Europe, you know, we will maintain our commitments with Europe.

We’ll maintain our Article 5 requirements. We’ll be able to deter aggression. We want to build our partnerships there. And one of the things that we’ve made clear with them is not — you know, not only are we going to continue our commitments there, but we are going to develop the kind of innovative presence that we think will make clear to Europe and to those that have been our strong allies over the past that we remain committed to protecting them.

Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff: Could I elaborate on the European one, sir?

The strategy talks about a shift to the future. And all of the trends, demographic trends, geopolitical trends, economic trends and military trends are shifting toward the Pacific. So our strategic challenges in the future will largely emanate out of the Pacific region, but also the littorals of the Indian Ocean, for that matter.

But the point is — so our strategic challenges are shifting, and we have to pay attention to those shifts. But what we do will always be built on the strong foundation of our traditional strategic partnerships, and NATO is chief among them.

So this is not a separation in any way from NATO. And we’re in dialogue and will be in dialogue with them about what it means.

Question: Mr. Secretary, I wonder if you could square a statement you made in your remarks, “We will have the capability to confront and defeat more than one adversary at a time,” with the guidance, which pretty clearly states that you will have the capability to fight one regional conflict and what would essentially be a holding action in a second regional conflict. Are those two consistent?

Defense Secretary Leon Panetta: You know, I think that the structure for making defense decisions, looking at the past as well as the present, has always been — can the United States confront enemies, aggressors, more than one, and be able to defeat them.

That’s the key question. Whatever strategic formula you use, that remains the fundamental question — can we confront and defeat any enemy that faces us? And the answer to that question is, with the Joint Force that we are creating here, we can. We can confront more than one enemy at a time.

The nature of warfare today is that as you — as you engage, you have to look at how you do it, what forces do you use to be able to confront that enemy, what exactly is involved. I mean, the reality is you could face a land war in Korea, and at the same time face threats in the Straits of Hormuz. We have the capability, with this Joint Force, to deal with those kinds of threats, to be able to confront them, and to be able to win. That’s what counts.

Question: [Inaudible] — past 10 years that — in Iraq and Afghanistan — that you cannot fight to defeat an enemy in two theaters at the same time?

Defense Secretary Leon Panetta: Well, I think the bottom line of what we’re seeing happen is that we’ve just ended the mission in Iraq, and we’re in the process of ending a mission in Afghanistan. And I think our view is that we’ve achieved those missions, or we’re in the process of achieving those missions.

Question: Mr. Secretary, the president said that you’re going to be getting rid of outdated Cold War systems. Can you give us any sense for what he was talking about there? What types of systems?

Defense Secretary Leon Panetta: Well, again, the budget drop here at the end of the month will illuminate programs that have been adjusted or terminated or — and others that have been reinforced. I think what the president had in mind, or at least what I believe he had in mind, is that — is that there are — you know, back to the question about — can we do two wars?

That two-war paradigm has been a bit of an anchor, frankly, in trying to help us figure out the future. And it’s not about whether we will fight adversaries as they confront us: it’s how. And so, to thread those few questions together — your question about, what are the outdated systems and processes and programs — that’s the work that we have been doing, must continue to do, to determine the “how” of it without tying ourselves to a paradigm that, frankly, is a residual of the Cold War.

Question: Mr. Secretary, will efficiencies be enough to reduce your personnel cost, when you take an honest look at what you spend per man in the military? Or, honestly, are you going to have to look at reducing retirement benefits, asking service members to pay more for their health care?

Defense Secretary Leon Panetta: Well, again, the specifics will be provided in the president’s budget that hopefully will be released within the next two to three weeks — I guess soon after the president’s State of the Union address. But, as I’ve made clear, I felt it was important that everything be on the table, and that we look at a number of areas in order to be able to achieve our savings and be able to develop the kind of defense force that we want for the future.

So yes, we look at efficiencies. We have a responsibility to look at how we can try to make this place more efficient, get rid of duplication, get rid of waste, and my predecessor began that process, and we’re continuing it as part of this budget. That’s a significant part of the budget that we’ve worked on.

Two, we’ve got to look at the whole area of procurement and weaponization, and look at all of those areas — those tremendous costs associated with those areas. We want to make sure that the weapons that we select meet the needs of the defense force that we’re building. That’s the key. But clearly, that’s another area that was reviewed.

Thirdly, the area of compensation. We — that has been an area that’s increased in terms of cost. We want to maintain the quality of benefits that flow to our troops and to their families. That’s a key red line for us. We’re going to maintain those, but at the same time, we have a responsibility to control costs in those areas as well. And that’s part of what we will present as part of our budget.

And then lastly, force structure reductions. All of those pieces are part of the budget and you’ll see the decisions associated with that when the budget is revealed.

Question: First of all, what’s the reaction that you’ve been getting from Congress in your conversations with them on this plan? And on the issue of sequester, the sacrifices that the military is making, downsizing, will that be enough to kind of sound enough alarms to forestall sequester or do you think that some other action is going to need to be taken or is the military going to have to give up more, you know, sort of as a half step between now and the end of the year?

Defense Secretary Leon Panetta: We — I’ve made it a point — we’ve all made it a point to stay in close consultation with the members of Congress that we deal with on the key committees up there. And I spent time sitting down with them and their members, briefing them on the discussion we’re having, briefing them on the defense strategy. I briefed the chairman yesterday as well and the ranking members with regards to the strategy that we’re working on.

I think all of them recognize the challenge that we’re facing. All of them recognize, you know, how tough these decisions are. But I think all of them also recognize that we can do this in a way that protects our national defense and that establishes a defense force for the future.

So I — I’m confident that, you know — that as we work through this and ultimately as we reveal the decisions on the budget that reflect the policy we’re putting out there that, you know, there are going to be members that will clearly not support some of the — of those decisions. I mean, that’s the nature of making hard choices. But I think overall, because we based this on strategy, because we based this on a policy of saying this is the kind of defense force we want for the future, I think that, within that framework, if we can all stick to that and if we can all use that as the basis and the foundation for the debate that’s going to take place, I am confident that ultimately Congress will support what we’re trying to do.

Question: Sir, let me follow up on what Dave and Martin just asked. The strategy talks about moving away from a — to potentially fighting two land wars simultaneously. You mentioned the tensions in the Persian Gulf. Clearly the Iranians know that the U.S. is fighting a ground war in Afghanistan until 2014. Are you saying with this new strategy that fighting a land war in the Persian Gulf — in Iran, for instance — is off the table as a result of this new strategy?

Gen. Martin Dempsey: Could I take it?

Defense Secretary Leon Panetta: Sure.

Gen. Martin Dempsey: I want to make sure that I get a shot at this one because — (laughter) — you know, this is — Secretary of Defense Gates said, you know, we’re never going to fight another land war, and I had the West Point class of 2014 at my doorstep.

[Laughter]

So we’re a global power, and we have to be able to conduct military activities and operations across the full spectrum. Nobody and no — nobody has said and nowhere in the document does it say we’re not going to fight land wars. It doesn’t say we’re never going to do stability operations. It does say explicitly we have to be capable of conducting operations across the full spectrum.

It’s a matter of scope and scale, time, risk, reversibility, and those are the issues that we continue to work as we work on this living document. But it would be really a mistake to suggest that — or for you to walk away with the impression, or anyone to walk away with the impression — that we’re going to niche ourselves to some point on the spectrum of conflict and declare ourselves a global power.

Question: What message do you have for Iran as a result of this new strategy?

Gen. Martin Dempsey: The message for — you know, that we’ve had consistently for Iran is that, you know, we expect them to be a responsible member of the — of the community of nations, not deny freedom of navigation, freedom of movement, freedom of access, and we are determined that they will not acquire a nuclear weapon.

Question: Could I get clarification on one thing you just said? You said you’re committed to maintaining the quality of benefits. That seems to leave room to reduce the quantity of benefits. Specifically, will there be cuts in future benefits for our armed forces in the coming budgets?

Defense Secretary Leon Panetta: Well, again, Mik, that — you know, that’s something that we’ll present as part of the president’s budget, but I want to make very clear that we are going to protect the quality, we’re going to protect the benefits that are provided to our troops and to their families. At the same time, as I said, we have some responsibility to try to control costs in this area.

I think the troops understand that we’ve got to control those costs. But when it comes to their basic benefits, when it comes to the retirement benefits of those who have served, when it comes to the benefits that we provide their families, we are going to continue to provide that and not break faith on those?